U.S. Justice Dept. to Sue Publishers, Apple, for Price Collusion?

[djulian]

Originally Posted by HarryT

The previous poster is probably thinking of Apple's free multimedia creation tool "iBook Publisher". If you choose to use this free tool, then the output from it can only be sold in the iBookstore (it can freely given away elsewhere, but not sold). Given, though, that it's a tool for creating multimedia content which will only work in iBooks, this is not a terribly great restriction.

There was a long thread about this recently.

My mistake on that. HarryT is correct.

I know this may lead publishers towards windowing content, but that model doesn't bother me nearly as much as the agency pricing. I'd rather pay $7 for a ebook two months after release than $15 on the day of release. I've got plenty of reading to do in the meantime.

[Xanthe]

The latest Reuters article on it:
http://uk.reuters.com/article/2012/0...media-telco-SP

[Elfwreck]

Originally Posted by HarryT

It means that it puts even the smallest bookshop on an even keel with the big players on price terms. The same argument is used for fixed pricing for books in many European countries, and there is some truth in it. Fixed pricing for books was abolished in the UK in 1997. Since then, and as a direct result, the overwhelming majority of small independent booksellers have gone out of business.

I understand the theory--I haven't seen it working in ebook stores. With all prices the same, the stores with the biggest selection, most reviews, & most coding features--Amazon and B&N--have things to offer that smaller stores don't.

Since small ebookstores were never going to be able to discount as much as Amazon, they counted on other features to draw customers. Fictionwise had Micropay with a lot of bonuses for buying at their store: buy one, get one half-price later. Or get one free later. Other sites could have member-only discounts or coupons, or other kinds of activity/purchase rewards. But with agency pricing, there's no reason not to buy from the largest aggregator.

[fjtorres]

Originally Posted by Elfwreck

I understand the theory--I haven't seen it working in ebook stores. With all prices the same, the stores with the biggest selection, most reviews, & most coding features--Amazon and B&N--have things to offer that smaller stores don't.

Yup.
The reality so far is that with some 90-plus percent of the US ebook market (which is all DOJ can be concerned with, unlike the Brusselcrats who readily police the entire world ) tied up into walled gardens, Agency pricing or price competition will do nothing meaningful competition. If anything, the price fix favors the big entrenched players over the small, independents.

Which is why the DOJ shrugs off any claims of increased competition in the face of verified and significant harm to consumers. They see real harm any merely theoretical benefit.

Most importantly, US antitrust law is *consumer* protection law, not corporate protection law as in europe.

So it doesn't matter if the price fix hurts Amazon or not; if the collusion hurts consumers it is illegal. And if the price-fixers think Amazon's market share is illegally obtained, let *them* sue under antitrust. (But don't expect that to happen; they'd be laughed out of court.)

[coleman]

The BBC has also picked up the story.
http://www.bbc.co.uk/news/technology-17300074

The question I'd really like to see answered with hard numbers, is how much does the claim that the physical production is only a very small amount of the cost. But it also wasn't addressed that for physical books, I assume it's also mainly the only cost that is in perpetuity, since they don't have to pay editors and what not for subsequent costs, and I doubt they have a lot advertising costs associated with multiple printings down the line.

[FizzyWater]

If they're really worried about Amazon taking over the world, can't they get them for having a monolopy or something? Is insisting on fixed prices (ignoring the deals made with Apple) really the only option to protecting competition?

[JSWolf]

Originally Posted by HarryT

It means that it puts even the smallest bookshop on an even keel with the big players on price terms. The same argument is used for fixed pricing for books in many European countries, and there is some truth in it. Fixed pricing for books was abolished in the UK in 1997. Since then, and as a direct result, the overwhelming majority of small independent booksellers have gone out of business.

Fictionwise was the little guy with a very nice business model that worked very well. Now they are a former shell selling mostly eReader format. Sad really.

[fjtorres]

Originally Posted by FizzyWater

If they're really worried about Amazon taking over the world, can't they get them for having a monolopy or something? Is insisting on fixed prices (ignoring the deals made with Apple) really the only option to protecting competition?

High market share isn't against the law. Abusing high market share to prevent competition is. What everybody fears about Amazon is that at some future point they *might* abuse their market power to hurt *consumers*.
Problem is, they aren't there yet and nobody has documented any actual consumer harm.
So any fed action against Amazon is wishful thinking.

[fjtorres]

Originally Posted by JSWolf

Fictionwise was the little guy with a very nice business model that worked very well. Now they are a former shell selling mostly eReader format. Sad really.

And Exhibit A about how the Price Fix Scam is doing nothing to improve competition but instead is reducing it.

[SteveEisenberg]

Originally Posted by FizzyWater

If they're really worried about Amazon taking over the world, can't they get them for having a monolopy or something?

There's nothing illegal about trying to get a monopoly. Now, once you have a monopoly, you are likely to be a legal target, but that problem isn't one Amazon currently has.

As for your phrase "Amazon taking over the world," it seems to me too dismissive of the near-certainty that Amazon does act the way a company acts when it seeks a monopoly it does not yet have. Consider this fact:

Prior to agency pricing, Amazon often sold best-selling digital books for less than it paid for them

There's no explanation for Amazon selling lots of books at a loss than that they were trying to put financially weaker competitors out of business.

If you think this is paranoia, I suggest reading The First Tycoon: The Epic Life of Cornelius Vanderbilt* You'll see how, over and over, Vanderbilt and his competitors tried to put each other out of business by pricing below cost, and then jacked up prices when they succeeded. I don't think that human nature has changed here between the steamboat and internet eras.

_______________________
* Kindle link for US library card holders

[fjtorres]

Originally Posted by SteveEisenberg

There's no explanation for Amazon selling lots of books at a loss than that they were trying to put financially weaker competitors out of business.

Sure there is.
It's called basket pricing.
http://dealicacy.com/?p=225

It's practiced regularly by sophisticated retailers all over the world. It leads to big profits *and* increased market share. It is also perfectly legal.

Note that there is a difference between selling "a lot of books at a loss" and selling *all* books at a loss. Just as there is a difference between making a profit off *every* book you sell and making a net profit from selling books.

[AnemicOak]

The funny thing is, there really weren't that many $9.99 books that were heavily discounted back then. The only ones with a really extreme discount were books (Hardcover equivalents with $25ish lists) that hit the bestseller list. A lot of the other $9.99 stuff was around that price everywhere else that discounted too (such as Trade PB equivalents with lists of $11.99-$14.99), but to hear some people tell it every book was a loss leader @ $9.99 or less. Better deals were to be found elsewhere back then too, espcially on backlist stuff.

[SteveEisenberg]

Originally Posted by fjtorres

It's called basket pricing.
http://dealicacy.com/?p=225

A variation closer to eBook basket pricing would be where the first book in a series is free in order to rope you into buying further books for money. Barnes and Noble can possibly match Amazon there, although the first example I looked for still showed deeper Amazon pockets:

http://www.amazon.com/Open-Season-Gu...1264708&sr=1-1

http://www.barnesandnoble.com/w/open...or+open+season

The $9.99 price was the opposite of basket pricing. $9.99 wasn't for a basket containing a few loss leaders, but for setting up expectations unmatchable by financially weaker competitors.

[stonetools]

Originally Posted by fjtorres

Yup.
The reality so far is that with some 90-plus percent of the US ebook market (which is all DOJ can be concerned with, unlike the Brusselcrats who readily police the entire world ) tied up into walled gardens, Agency pricing or price competition will do nothing meaningful competition. If anything, the price fix favors the big entrenched players over the small, independents.

Which is why the DOJ shrugs off any claims of increased competition in the face of verified and significant harm to consumers. They see real harm any merely theoretical benefit.

Most importantly, US antitrust law is *consumer* protection law, not corporate protection law as in europe.

So it doesn't matter if the price fix hurts Amazon or not; if the collusion hurts consumers it is illegal. And if the price-fixers think Amazon's market share is illegally obtained, let *them* sue under antitrust. (But don't expect that to happen; they'd be laughed out of court.)

Well, the Current Administration likes to appear even handed, so you might see a settlement, combined with the DOJ starting an antitrust investigation on Amazon. That's not a stretch, either: under current antitrust law, a major company that uses profits from one part of its business to bankroll a price war to drive out competitors in another part of its business is engaging in illegal antitrust activity- which kind of sounds like what Amazon is doing.
If this were to happen, Amazon would most likely have to scale back on the discounting- which would achieve the same purpose as agency pricing.

[pdurrant]

Originally Posted by Ninjalawyer

Then, when iTunes wielded more power than the record companies because of the practice, they told the record companies they would be selling DRM free tracks.

I think you'll find it was the record companies who finally abandoned DRM in an attempt to reduce Apple's dominance, allowing Amazon to sell DRM-free MP3 songs several months before Apple were permitted to drop DRM.